Is it necessary to a prepare a P11D?

Is it necessary to a prepare a P11D?

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My understanding has been that where P11Ds are prepared and there is no dispensation* that all expenses reimbursed to the employee should be included on the P11D and an expense claim made by the employee on the tax return.  This results in HMRC deducting the expenses when issuing a new tax code.   

In a recent call to the tax office (to get a tax code that disregards these "benefits" I was informed that a P11D isn't required if 100% of the expenses are for business purposes.

Has the person at HMRC got it wrong?  Or is my understanding incorrect? 

* the company is a single director/employee company

Replies (11)

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By Moonbeam
22nd Mar 2011 15:54

Dispensation not possible

Without a dispensation HMRC can get quite difficult if they pick on the company concerned and see that P11D's are not being done, even if no tax/NI is due.

It's a complete waste of time for all concerned, but in this case, you won't be able to get a dispensation so best to do the P11D's.

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By Steve Holloway
22nd Mar 2011 16:14

Although I agree with moonbeam ...

 in ten years I have had just two PAYE enquiries (I have 100 business clients) and neither even looked at the issue. I believe there is a move to make dispensations available to all to kill off the expenses reporting ... it is a waste of time and should be an easy win for the coalition if they want to reduce admin for small businesses.

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Giraffe
By Luke
22nd Mar 2011 16:53

Single director company

I am a single director company with no employees (apart from myself) and I got a dispensation with no question, just applying online.

That said an almost identical client did not get one.  I think it is the luck of the draw, but it should not be as there has been a move over to allow them even where an independent check of expenses is not made as long as all receipts are provided and kept.

There is still the issue of the phone line being in my name though which means it will go on a P11d and on my tax return.  This is a real pain for those who do not do a tax return though.

I have a couple of clients where p11ds haven't been done where strictly they should be done, I am moving them all over to contracts in company name and dispensations but it is a slow process.  If one of them get picked up we'll just have to play the no tax due card and hope, to be honest.

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By taxhound
22nd Mar 2011 18:58

on line dispensations

I know there are some accountants on here who take the view that p11ds are a waste of time and don't bother if there is no tax liability, but I do end up preparing quite a few for clients.  

My understanding is that some expenses don't need to be included (eg where you buy goods for the company and these are then reimbursed so the employee is effectively acting as an agent for the company when making the purchase), but where the employee has "enjoyed" a service and then been reimbursed (eg rail fares, entertaining etc) then a p11d is required.

You can apply on line for dispensations now (look up form p11dx) and I have had a quite a lot of success in getting these for quite a few one man limited companies.  Except for myself, where they said there was not enough controls as there is no one to check my expense claims.  Doh.  (perhaps the dog would oblige).

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By fellowcraft
22nd Mar 2011 23:32

Dispensations
I've only ever had 1 refused as it included benchmark scale rates for subsistence. HMRC wouldn't allow it as I couldn't prove I was doing a sampling exercise if there is less than 5-10 employees. I met a contact last week who'd seen Baker Tilly charge £20k to obtain a dispensation in these circumstances. If anyone has any tips for me I'm all ears!

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By pauljohnston
28th Mar 2011 11:07

P11dx tips

We have managed to get one man Ltd Companies through by advising HMRc in the relevant box that us the Accountants will carry out the annual check when we do the accounts.

WE tell clients how they are to be presented and if they dont we tell them that we will charge to bring their records up to our requirements.

Hope this helps

 

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By shoshana
28th Mar 2011 13:59

Independent checks?

We applied for a dispensation as a husband and wife company and had no problems (apart from the subsistence scale rate issue identified above which is only given where there are a large number of employees and checking each one's claims and receipts would be cumbersome).

This notion that someone has to independently check the claim is not correct. The dispensation letter says that one is available where 'directors' expenses are independently checked OR (emphasis added) where relevant vouchers are held in support of the expenditure'. If anyone wants a copy of the letter I would be happy to send it to you.

I am working in suny Brighton today and hold a receipt for my sandwiches for lunch which I will be duly reclaiming from my company and not reporting on the P11D as a result of my dispensation - makes them taste a lot better.

If we don't have a receipt, we don't claim it.

Malcolm

Malcolm Greenbaum

Greenbaum Training and Consultancy Limited

IFRS, UK GAAP, US GAAP, UK Tax and VAT

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Della Hudson FCA
By Della Hudson
28th Mar 2011 14:20

Refused one allowed another

I had a blitz on dispensations last year and applied for several in the same week. I had been told on a HMRC PAYE update that they were keen to get these through to save their admin as well as ours.

I got one through for a sole director/shareholder with no mention of independent checks but had another rejected as my checks would have happened after the event.

There is obviously no consistency.

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By cfield
28th Mar 2011 22:39

Luck of the draw

Dispensations are easier to get then before but there are still some wallies in HMRC who seem determined to make life difficult for small companies. A few years ago I ran into one at the Edinburgh office who queried 3 of my clients. He challenged practically everything my clients claimed on expenses, including late night taxis (he asked if their wives travelled in the taxis too), travelcards (I managed to get them to allow 5/7ths) newspapers (he had to relent in the end as my client used them for marketing meetings) and a guy who sold his computer to the company for £400 (we said it was worth more than the second hand market value due to the e-mail address book!).

This idiot tied us up in reams of correspondence for months, and despite being eventually made to back down on almost everything he queried, he still refused to allow the dispensation. After that I refused to apply for any more from the Edinburgh office, just in case they crossed his desk. It was easier just to the P11Ds.

Mind you, we had a laugh at his expense by telling him people down South spend more on lunch as they eat much healthier foods than fried Mars bars and chips. He was so wound up he wrote back and said it was an urban myth!

Chris

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By Tim Robinson
30th Mar 2011 14:59

Pecuniary Liability

Sorry to be picky, but Luke stated;

There is still the issue of the phone line being in my name though which means it will go on a P11d and on my tax return

My understanding is that this is a pecuniary liability which should be payrolled rather than P11D-ed, I am surprised that no-one else has pointed this out.  Just goes to show how complex this area can be.

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By Joss
08th Apr 2011 18:14

payment of director's phone bills

As I recall, it makes a difference (1) who the bill is addressed to and (2) who pays the supplier.

My understanding is that if the director pays the supplier and the bill is privately in his name and then the company reimburses him for out of pocket expense then this goes on the P11D.

 

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